Video | Agriculture | Confidence | Economy | Energy | Employment | Finance | Media | Property | RBNZ | Science | SOEs | Tax | Technology | Telecoms | Tourism | Transport | Search


Z margins likely to fall under competitive pressure: analyst

Z Energy fuel margins likely to fall under competitive pressure, Deutsche report

May 9 (BusinessDesk) – Transport fuels distributor and retailer Z Energy’s success in raising margins on petrol and diesel sales is under pressure and are “likely to trend toward the industry’s lower net margin,” says Deutsche Bank analyst Grant Swanepoel in a research note on yesterday’s full year result from Z.

The Wellington-based company, which took over the refining, distribution and retail operations of Shell New Zealand in 2010 and listed on the NZX last year, reported earnings before interest, tax, depreciation and amortisation of $219 million for the year to March 31.

While that was ahead of last year’s prospectus forecast of $207 million, the apparent outperformance was “just a modest beat, or near top end of guidance”, once operational costs were adjusted for abnormal impacts, Swanepoel said.

Z reported fuel margins improved from 15.8 cents per litre to 17.1 cents per litre, ahead of a target 16.5 cents per litre, while accepting some loss of market share, which now sits 2 percent above where it was when Z was formed.

“Management indicated that it is now responding to the competitor discounting strategies, which it refers to as tactical discounting,” the Deutsche note says. “So far, while still early days, this has seen little change in competitive behaviour. A best outcome would be that competitors will stop the retail discounting.

“However, we expect that all it means is that Z’s margin at the pump will slowly trend toward the industry’s lower net margin.”

Deutsche maintained its ‘hold’ recommendation on Z, targeting a share price of between $4.08 and $4.11.

The company’s shares gained 1.8 percent to $3.90 in early trading on the NZX today, having initially fallen slightly to $3.87 after yesterday’s result announcement.

“The one metric that could cause a surprise on the upside over the 2015 financial year would be if the industry pushes the gross petrol margin, as reported by the Ministry of Business, Innovation and Employment, up another few cents per litre,” said Swanepoel’s note.

“We are forecasting just a 0.3 cents per litre rise over the year after a 2.6 cents per litre over the 2014 financial year.”


© Scoop Media

Business Headlines | Sci-Tech Headlines


Postnatal Depression: 'The Thief That Steals Motherhood' - Alison McCulloch

Post-natal depression is a sly and cruel illness, described by one expert as ‘the thief that steals motherhood’, it creeps up on its victims, hiding behind the stress and exhaustion of being a new parent, catching many women unaware and unprepared. More>>


DIY: Kiwi Ingenuity And Masking Tape Saves Chick

Kiwi ingenuity and masking tape has saved a Kiwi chick after its egg was badly damaged endangering the chick's life. The egg was delivered to Kiwi Encounter at Rainbow Springs in Rotorua 14 days ago by a DOC worker with a large hole in its shell and against all odds has just successfully hatched. More>>


Trade: Key To Lead Mission To India; ASEAN FTA Review Announced

Prime Minister John Key will lead a trade delegation to India next week, saying the pursuit of a free trade agreement with the protectionist giant is "the primary reason we're going" but playing down the likelihood of early progress. More>>



MYOB: Digital Signatures Go Live

From today, Inland Revenue will begin accepting “digital signatures”, saving businesses and their accountants a huge amount of administration time and further reducing the need for pen and paper in the workplace. More>>

Oil Searches: Norway's Statoil Quits Reinga Basin

Statoil, the Norwegian state-owned oil company, has given up oil and gas exploration in Northland's Reinga Basin, saying the probably of a find was 'too low'. More>>


Modern Living: Auckland Development Blowouts Reminiscent Of Run Up To GFC

The collapse of property developments in Auckland is "almost groundhog day" to the run-up of the global financial crisis in 2007/2008 as banks refuse to fund projects due to blowouts in construction and labour costs, says John Kensington, the author of KPMG's Financial Institutions Performance Survey. More>>


Health: New Zealand's First ‘No Sugary Drinks’ Logo Unveiled

New Zealand’s first “no sugary drinks logo” has been unveiled at an event in Wellington... It will empower communities around New Zealand to lift their health and wellbeing and send a clear message about the damage caused by too much sugar in our diets. More>>


Get More From Scoop

Search Scoop  
Powered by Vodafone
NZ independent news